I think (unless someone else know that this is a 'known issue') we may need a few more details:
Which version of Word are you using? Is it the Mac OS version or is the issue on a PC?
Are they displaying on screen incorrectly, or is this an issue that occurs when printing, or both?
Get back to us, and I'm sure we'll be able to point you in the right direction.

As I'm not an Apple I can't reproduce that error. Under Windows Vista it looks OK both in MS Office and Open Office. But all three fonts you mention have have the same errors in the font metrics. Ascenders and decenders values are set far to low while Win Ascent and Win Decent have correct values, which explains why the fonts work fine under Windows.
Best to contact the authors.

Edit:

Quilted Butterfly:
Both Typo Ascender and Ascender are set at 800 which should be 834 and 1097 (or more).
Both Typo Decender and Decender are set at -500 which should be -534 and -1092 (or more).
Typo Line Gap is set at 0 which should be 100.

Rat Infested Mailbox:
Both Typo Ascender and Ascender are set at 750 which should be 573 and 1598 (or more).
Both Typo Decender and Decender are set at -600 which should be -791 and -1743 (or more).
Typo Line Gap is set at 0 which should be 100.

Prophecy Script:
Both Typo Ascender and Ascender are set at 750 which should be 898 and 970 (or more).
Both Typo Decender and Decender are set at -250 which should be -423 and -684 (or more).
Typo Line Gap is set at 0 which should be 100.

oddly, they all seem fine when on 'pages'. koeiekat: thanks. now i know that 'loops' are actually ascenders and descenders! pilaster: great questions. it didn't occur to me that it may just be on screen and a different outcome when printing. in the meantime, (i'm on a macbook pro), it works on pages in case anyone else wanders by here. i will print and see what happens.

'The letters get cut off at the top/bottom in Word, how do I fix it?"
"You have to increase the line spacing. If you are going to print the document there is nothing to worry about though, as the letters won’t be cut off in the printed document."

... koeiekat: thanks. now i know that 'loops' are actually ascenders and descenders! ...

Nope.
The usage for TypoAscender and Typo Descender is that it be used in conjunction with unitsPerEm to compute a typographically correct default line spacing. The goal is to free applications from Macintosh or Windows-specific metrics which are constrained by backward compatibility requirements. These new metrics, when combined with the character design widths, will allow applications to lay out documents in a typographically correct and portable fashion.